Market Overview

PAGS Reports Preliminary Results for 2Q18

Share:

Net Income of Approximately R$ 228 Million, up 178% Compared
to 2Q17 or R$242 Million after Non-GAAP Adjustments to 2Q18, up
195% Compared to 2Q17

PagSeguro
Digital Ltd., or ("PagSeguro" or "we") (NYSE:PAGS), today announced
preliminary operational and financial results for 2Q18. PagSeguro
expects to report Total Payment Volume (TPV) of approximately R$16.9
billion, Net Income of approximately R$228 million and Non-GAAP Net
Income of approximately R$242 million.

Operational and Financial Metrics (R$mn)   2Q18 (1)   1Q18   2Q17   Variation

2Q18 X 1Q18 (1)

 

Variation

2Q18 X 2Q17 (1)

TPV   16.9   14.4   8.1   17%   109%
Net Income   228   149   82   53%   178%
Non-GAAP Net Income (2) (3)   242   213   82   14%   195%

[1] Numerical figures are preliminary and approximate.

[2] The reconciliation of GAAP measures to Non-GAAP measures are
presented at the end of this announcement and it includes (i) foreign
exchange gain on IPO primary share proceeds, (ii) foreign exchange gain
on follow-on primary share proceeds, (iii) share-based long-term
incentive plan (LTIP), (iv) tax related to remittance of IPO primary
share proceeds (IOF tax), (v) tax related to remittance of follow-on
primary share proceeds (IOF tax), and (vi) income tax on Non-GAAP
measures.

[3] The presentation of Non-GAAP Net Income is aligned with the
Non-GAAP Net Income reported under the Form 6-K/A furnished to the SEC
on July 20, 2018, which replaced the previous Form 6-K furnished to the
SEC on May 30, 2018, and aligned the presentation of non-GAAP financial
measures with the presentation included in PagSeguro's Registration
Statement on Form F-1 originally filed with the SEC on June 18, 2018.
Therefore, Non-GAAP Net Income for 2Q18 does not include the net
adjustment of notes receivable at present value of approximately R$8
million (or Non-GAAP Net Income of approximately R$ 250 million).

"Our second quarter results show the strength of our unique
ecosystem. Being an independent fintech allows us to think exclusively
on our clients' financial needs, delivering growth and profitability
while creating a higher stickiness with our clients by offering a unique
ecosystem through our digital account. Being the first mover, with an
unreplicable online distribution through UOL and mobile first, brings a
natural advantage to PagSeguro. We believe that following this strategy
we will deliver long-term shareholder value through an increasingly
attractive and growing ecosystem," said Ricardo Dutra, CEO
of PagSeguro.

PagSeguro will provide full second quarter results and host a conference
call and earnings webcast on the following days and time, respectively:

  • Thursday, August 30, 2018, after market close.
  • Friday, August 31, 2018, at 10:00 AM ET.

Event Details

Dial–in in the US and International: 1-800-492-3904 (Toll Free) or +1
646 828-8246

Dial–in with connections in Brazil: +55 11 3193-1001 or + 55 11 2820-4001

Password: PagSeguro

Webcast: http://choruscall.com.br/pagseguro/2q18.htm

Forward Looking Statements

This press release includes "forward-looking statements" within the
meaning of the U.S. federal securities laws. Statements contained herein
that are not clearly historical in nature are forward-looking, and the
words "anticipate," "believe," "continues," "expect," "estimate,"
"intend," "project" and similar expressions and future or conditional
verbs such as "will," "would," "should," "could," "might," "can," "may,"
or similar expressions are generally intended to identify
forward-looking statements. These forward-looking statements speak only
as of the date hereof and are based on PagSeguro's current plans,
estimates of future events, expectations and trends that affect or may
affect our business, financial condition, results of operations, cash
flow, liquidity, prospects and the trading price of our Class A common
shares, and are subject to several known and unknown uncertainties and
risks, many of which are beyond PagSeguro's control. As a consequence,
current plans, anticipated actions and future financial position and
results of operations may differ significantly from those expressed in
any forward-looking statements in this press release. You are cautioned
not to unduly rely on such forward-looking statements when evaluating
the information presented and we do not intend to update any of these
forward-looking statements.

Reconciliation of Net Income to Non-GAAP Net Income

This press release includes certain non-GAAP measures. We present
non-GAAP measures when we believe that the additional information is
useful and meaningful to investors. These non-GAAP measures are provided
to enhance investors' overall understanding of our current financial
performance and its prospects for the future. Specifically, we believe
the non-GAAP measures provide useful information to both management and
investors by excluding certain expenses, gains and losses, as the case
may be, that may not be indicative of our core operating results and
business outlook.

These measures may be different from non-GAAP financial measures used by
other companies. The presentation of this non-GAAP financial
information, which is not prepared under any comprehensive set of
accounting rules or principles, is not intended to be considered
separately from, or as a substitute for, our financial information
prepared and presented in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with our results of operations as
determined in accordance with IFRS. These measures should only be used
to evaluate our results of operations in conjunction with the
corresponding GAAP measures.

   
Reconciliation of Net Income to Non-GAAP Net Income: 1Q18 2Q18 (1)
Net income 149   228  
Foreign exchange gain on IPO primary share proceeds [2] (90 ) -
Foreign exchange gain on Follow on proceeds [3] - (27 )
Share-based long-term incentive plan (LTIP) [4] 211 62
New shares issued (new hires/ additions to LTIP/ others) - 31

Recurrent quarterly provision

- 31
Tax related to remittance of IPO primary share proceeds (IOF tax) [5] 13 -
Tax related to remittance of Follow on proceeds (IOF tax) [6] - 1
Income tax on non-GAAP adjustments [7] (70 ) (21 )
Total non-GAAP net income adjustments 64   15  
Non-GAAP Net Income 213   242  
 
Share-based long-term incentive plan (LTIP)   1Q18   2Q18 (1)
Stock-based compensation expenses (non-cash) 131 40
Related Employer Payroll Taxes 80 22

[1] Numerical figures are preliminary and approximate

[2] Foreign exchange gain on IPO primary share proceeds:
financial income in the amount of R$90 million related to the
impact of exchange rate variation on the conversion from U.S. dollars
into Brazilian reais of the proceeds from our sale of new shares in the
IPO. We exclude this foreign exchange variation from our non-GAAP
measures primarily because it is an unusual income.

[3] Foreign exchange gain on Follow on proceeds: financial income
in the approximate amount of R$27 million related to the impact
of exchange rate variation on the conversion from U.S. dollars into
Brazilian reais of the proceeds from our sale of new shares in the
follow-on offer completed on June 22, 2018. We exclude this foreign
exchange variation from our non-GAAP measures primarily because it is an
unusual income.

[4] Share-based long-term incentive plan (LTIP): Stock-based
compensation expenses and related employer payroll taxes. This amount
consists of expenses for equity awards under our long-term incentive
plan (LTIP). We exclude stock-based compensation expenses from our
non-GAAP measures primarily because they are non-cash expenses. The
related employer payroll taxes depend on our stock price and the timing
and size of exercises and vesting of equity awards, over which
management has limited to no control, and as such management does not
believe these expenses correlate to the operation of our business. In
the 2Q18 the total approximate amount of R$31 million is mainly
related to new shares issued for new employees and employee additions to
the long-term incentive plan. The total approximate amount of R$31
million
is related to the recurrent quarterly provision.

[5] Tax related to remittance of IPO primary share proceeds
(IOF tax):
R$13 million related to the impact of Brazilian
IOF tax (currency remittance tax) payable when we remitted the proceeds
from our sale of new shares in the IPO from the Cayman Islands to
Brazil. We exclude this IOF tax on the remittance of IPO primary share
proceeds from our non-GAAP measures primarily because it is an unusual
expense.

[6] Tax related to remittance of follow-on proceeds (IOF tax):
approximately R$1 million related to the impact of Brazilian IOF
tax (currency remittance tax) payable when we remitted the proceeds from
our sale of new shares in the follow-on offer completed on June 22,
2018, from the Cayman Islands to Brazil. We exclude this IOF tax on the
remittance of follow-on proceeds from our non-GAAP measures primarily
because it is an unusual expense.

[7] Income tax and on Non-GAAP adjustments: consists of income
tax effect related to the Non-GAAP adjustments mentioned above,
excluding the foreign exchange gain on IPO primary share proceeds of R$90
million
and the foreign exchange gain on follow on proceeds of
approximately R$27 million, which are not taxable, and the tax
benefits related to other Non-GAAP adjustments.

About PagSeguro:

PagSeguro is a disruptive provider of financial technology solutions
focused primarily on micro-merchants, small companies and medium-sized
companies in Brazil. PagSeguro's business model covers all of the
following five pillars:

  • Multiple digital payment solutions;
  • In-person payments via point of sale (POS) devices that PagSeguro
    sells to merchants;
  • Free digital accounts;
  • Issuer of prepaid cards to clients for spending or withdrawing account
    balances; and
  • Operating as an acquirer.

PagSeguro is an UOL Group Company that provides an easy, safe and
hassle-free way of accepting payments, where its clients can transact
and manage their cash, without the need to open a bank account.
PagSeguro's end-to-end digital ecosystem enables its customers to accept
a wide range of online and in-person payment methods, including credit
cards, debit cards, meal voucher cards, boletos, bank transfers,
bank debits and cash deposits.

PagSeguro's mission is to disrupt and democratize financial services in
Brazil, a concentrated, underpenetrated and high interest rate market,
by providing an end-to-end digital ecosystem that is safe, affordable,
simple and mobile-first for both merchants and consumers.

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